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No matter how well the underlying company performs, stock prices will not rise forever.The same thing happened with the rise in drone inventory prices. aero environment (NASDAQ:AVAV), its price lost altitude by more than 6% on Friday.A new analyst note was the main catalyst for the decline, which was significantly larger than the benchmark’s 0.7% decline. S&P500 index.
Baird’s recommended cuts
Well before the market opened for the day, Baird’s Peter Arment lowered his recommendation on Aerovironment from the previous Outperform (i.e. Buy) to Neutral with a price target of $161 per share.
While Arment likes the drone company’s fundamentals, he’s concerned about the stock’s rapid rise. He noted in the note that this was triggered by the company’s third-quarter results released earlier this week. These exceeded analysts’ expectations and represented a significant increase compared to the same period last year. That shouldn’t come as much of a surprise, given the skyrocketing demand for the company’s combat drones.
“We remain bullish on the growing 2024 backlog for Replicators, LASSOs and large products,” the analyst wrote about some of the company’s key products. [foreign military sales] Although no bids have been made for the Switchblade 600, we believe AVAV stock is currently well valued. ”
high rating
Arment certainly has a point. AeroVironment stock’s rapid and sudden popularity has made its valuation expensive. The current price-to-sales ratio is 6.7 times, and the future P/E ratio is nearly 62 times. The investment community is eager to get a piece of the company’s success, and these days, that doesn’t come cheap.
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Eric Volkman has no position in any stocks mentioned. The Motley Fool has a position in and recommends AeroVironment. The Motley Fool has a disclosure policy.
Why AeroVironment Stock Lost 6% of its Value on Friday was originally published by The Motley Fool
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